Question 1

What is an Asset Management Agreement

Accepted Answer

The Asset Management Agreement is a fundamental document used when a professional asset manager takes on the responsibility of managing investments on behalf of a client in Hong Kong. It serves as the primary contractual framework governing the relationship between a licensed asset manager and their clients, whether institutional, professional, or high-net-worth individuals. The agreement must comply with Hong Kong's robust regulatory framework, particularly the Securities and Futures Ordinance and various codes and guidelines issued by the Securities and Futures Commission. It typically includes detailed provisions on investment mandates, risk management, fee structures, reporting requirements, and regulatory compliance obligations. This document is essential for asset managers operating in Hong Kong's financial markets and must reflect current regulatory requirements while protecting both parties' interests.

Question 2

What sections should be included in an Asset Management Agreement

Accepted Answer

1. Parties: Identification of the asset manager and the client, including their registered addresses and regulatory status. 2. Background: Context of the agreement and brief description of the services to be provided. 3. Definitions and Interpretation: Key terms used throughout the agreement and rules of interpretation. 4. Appointment and Authority: Formal appointment of the asset manager and scope of their authority. 5. Services: Detailed description of asset management services to be provided. 6. Investment Objectives and Restrictions: Client's investment objectives, strategy, and any investment restrictions. 7. Fees and Expenses: Management fees, performance fees, and other charges, including calculation methods and payment terms. 8. Client's Representations and Warranties: Client's confirmations regarding their status, authority, and understanding of risks. 9. Manager's Representations and Warranties: Manager's confirmations regarding licensing, authority, and capabilities. 10. Risk Disclosures: Mandatory risk warnings and disclosures required under Hong Kong law. 11. Compliance and Reporting: Regulatory compliance obligations and reporting requirements. 12. Instructions and Communications: Procedures for giving and receiving instructions and other communications. 13. Confidentiality and Data Protection: Obligations regarding confidential information and personal data protection. 14. Liability and Indemnification: Extent of manager's liability and mutual indemnification provisions. 15. Termination: Circumstances and procedures for termination of the agreement. 16. Governing Law and Jurisdiction: Choice of Hong Kong law and jurisdiction for disputes. 17. General Provisions: Standard boilerplate clauses including notices, amendments, and assignment.

Question 3

What sections are optional to include in an Asset Management Agreement

Accepted Answer

1. Professional Investor Treatment: Additional terms applicable when client qualifies as a professional investor under Hong Kong law. 2. Delegation: Terms governing the manager's ability to delegate functions to third parties. 3. Cross-border Provisions: Additional terms for clients or investments in other jurisdictions. 4. Electronic Services: Terms governing the provision of electronic trading or reporting services. 5. Specific Asset Class Provisions: Additional terms for specific asset classes like derivatives or private equity. 6. Client Money and Assets: Detailed provisions for handling client money and assets if held directly. 7. Anti-Money Laundering: Specific AML/CTF provisions beyond standard regulatory requirements. 8. Force Majeure: Provisions dealing with extraordinary events and market disruptions.

Question 4

What schedules should be included in an Asset Management Agreement

Accepted Answer

1. Investment Mandate: Detailed investment objectives, strategy, and restrictions. 2. Fee Schedule: Detailed breakdown of all fees, charges, and calculation methodologies. 3. Authorized Persons: List of persons authorized to give instructions on behalf of the client. 4. Risk Disclosure Statement: Comprehensive risk disclosures required under Hong Kong regulations. 5. Professional Investor Assessment: Documentation of client's professional investor status if applicable. 6. Reporting Requirements: Details of required reports, their frequency, and content. 7. Execution Policy: Manager's policy for achieving best execution. 8. Conflicts of Interest Policy: Manager's policy for managing conflicts of interest.

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